An exposure draft and explanatory material have been released on
the proposed amendments to Part IVA of the Income Tax
Assessment Act1936 (Part IVA). The
amendments apply to schemes entered into or commenced to be carried
out on or after 16 November 2012, rather than the original date of
the announcement (1 March 2012). Legislation is expected to be
introduced into parliament in the autumn 2013 sittings.

As you would be aware, the principal role of Part IVA is to
counter schemes that secure a tax benefit for the taxpayer. Under
the proposed amendments, a new objects clause will be inserted
confirming that Part IVA applies to a tax avoidance scheme where a
tax benefit is obtained in connection with that scheme and it must
be reasonable to conclude that a person entered into that scheme
for the sole or dominant purpose of enabling a taxpayer to obtain a
tax benefit.

Under the proposed legislation, when considering alternative
postulates (counterfactuals) in relation to a scheme, consideration
must be given to the other ways the taxpayer could have reasonably
been expected to achieve the same non-tax effects (if any) as it
achieved from the scheme. This amendment will prevent the taxpayer
from arguing the 'do nothing' counterfactual. It is important to
note that when hypothesising alternative postulates to a scheme, no
consideration is to be given to the potential tax costs of those
alternatives.

The amendments restore the dominant purpose test to its central
role as the 'pivot' around which Part IVA operates. The amendments
focus on the ways that the taxpayer might reasonably be expected to
have achieved the same non-tax effects as it achieved from and in
connection with the scheme. Further, the amendments ensure that in
considering alternatives to the scheme, no consideration is given
to the taxation implications of those alternatives.